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Nation’s retailers post best sales in two years

Consumers, seemingly unfazed by rising gasoline prices, spent enthusiastically during April, giving retailers their best performance in two years.
Circuit City Posts 65 Percent Gain In 4th Quarter Earnings
Gibran Espinoza (left) demonstrates a digital camera to shoppers at a Circuit City store last month. Seemingly unfazed by rising gasoline prices, consumers spent enthusiastically in April, giving retailers strong sales.Scott Olson / Getty Images file
/ Source: The Associated Press

Consumers, seemingly unfazed by rising gasoline prices, spent enthusiastically during April, giving retailers their best performance in two years.

Warmer weather, a late Easter and hot fashion trends helped entice shoppers, but merchants remained wary about the possibility that expensive gas and higher interest rates could still curb consumers’ appetites.

As major retailers reported their sales figures Thursday, many including Wal-Mart Stores Inc., Target Corp., Nordstrom Inc., Abercrombie & Fitch Inc. and Limited Brands Inc. had better-than-expected results. Even Gap Inc., which has disappointed Wall Street for months, posted a smaller sales decline than analysts expected.

“It looks excellent,” said Jharonne Martis, an analyst at Thomson Financial. She noted that although there are worries about the strength of sales in the next few months, “Consumers beat expectations. It seems like all stores got traffic.”

Based on results from 54 retailers, 35 beat estimates, one met, and the remaining 18 missed, Martis said. A positive sign was the robust results from teen retailers, indicating that younger consumers have a lot of discretionary spending despite high gasoline prices, she said.

The International Council of Shopping Centers-UBS sales tally of 69 retailers rose a robust 6.6 percent last month, the best performance since March 2004 when the reading was up 7.0 percent. The tally is based on same-store sales, or sales at stores open at least a year. Same-store sales are considered the best indicator of a retailer’s performance.

A big factor boosting sales last month was a late Easter, which fell on April 16 and was three weeks later than last year. Because of the calendar shift, retailers and analysts look at the combined spring selling period of March and April, which was up a solid 4.3 percent, better than the 3.1 percent gain in the year-ago period.

Despite the upbeat reports, retailers, particularly those that cater to low-income consumers, remain anxious. Gas now hovers around $3 per gallon, and is expected to stay high during the heavy summer driving season.

Merchants are wondering when the pressure from higher interest rates, which makes financing debt more expensive, as well as higher gas prices will force shoppers to finally cut back. A cooling housing market has also slowed the trend of people taking spendable cash out of their appreciated homes through refinancing.

In fact, according to a survey of 58,000 consumers conducted last month by NPD Group Inc., a market research company, 72 percent said rising prices would hurt their discretionary spending, compared to 42 percent in the year-ago period.

The good news is that consumers are enjoying solid gains in the job market, which has offset the pain at the gasoline pump, analysts said.

The Labor Department reported Thursday that new claims for unemployment benefits rose last week by 5,000 to 322,000. Even with the rise, the level of claims still pointed to a good job-market climate. Seasonable adjustment difficulties related to spring recesses may have distorted last week’s number, a department analyst said.

Meanwhile, another government report showed that a measure of employers’ wage costs rose at a solid rate of 2.5 percent in the first quarter.

Wal-Mart reported a 6.8 percent gain in same-store sales. That was better than the 5.7 percent estimate from analysts surveyed by Thomson Financial and far outpaced the slim 1.4 percent gain posted in March.

Analysts estimate that the change in Easter boosted sales for merchants up to 2 percentage points in April, while depressing March results by that amount.

“Rising fuel costs were overshadowed by the customers’ response to merchandise in apparel for the entire family and consumables,” Tom Schoewe, Wal-Mart’s chief financial officer, said in a statement. “April was a strong month for toys, from traditional items like dolls, balls, and outdoor toys to electronics.” He noted that the discounter has seen customers buying more toys, video games, music and movies, in addition to candy.

Target posted a 10.4 percent gain in same-store sales, better than the 10 percent estimate.

Costco Wholesale Corp. had a 7 percent gain in same-store sales, beating the 5.5 estimate from analysts.

Department stores had mixed results. Upscale Nordstrom had a 7.3 percent increase in same-store sales, exceeding the 4.8 percent estimate.

J.C. Penney Co. Inc. had a 2.6 percent gain in same-store sales in its department store business, a bit below the 2.7 percent analyst estimate.

Federated Department Stores Inc., which acquired May Department Stores Co. last year, had a 0.8 percent decline in same-store sales, less than the 1.7 percent decline that Wall Street projected. Same-store sales include only Macy’s and Bloomingdale’s locations. The company said April’s results were hampered by the shift into May of a major Macy’s sales event held in April last year.

Limited had a 9 percent increase in same-store sales, better than the 5.2 percent gain Wall Street expected.

Talbots Inc. had a 10.8 percent gain in same-store sales, better than the 1.6 percent estimate.

Gap, which has been struggling with coming up with the right fashion assortments, posted a 3 percent decline in same-store sales. That was less than the 4.7 percent drop Wall Street expected.

Business at teen retailers rebounded in April after posting lukewarm results earlier this year.

Abercrombie & Fitch reported a 17 percent gain in same-store sales, well exceeding the 7.9 percent estimate.

Pacific Sunwear of California Inc. had a 14 percent gain in same-store sales, exceeding the 5.2 percent estimate from analysts.